ESG Regulations and Business Profitability: A Comparative Analysis of Indian and European Union Frameworks

Abstract

This paper will analyse the concept of ESG (i.e. Environmental, Social and Governance) regulation law and economic evaluation in India and European Union. the paper will study the impact of ESG on corporate profitability and its long-term value (Dash, 2025) by emphasising on SEBI’s Business Responsibility and Sustainability Report (further refereed as BRSB) framework and EU’S Corporate Sustainability Report Directive (further referred as CSRD) along with 2025-2025 Omnibus revisions to check whether mandating ESG disclosures on companies act as a genuine catalyse for financial performance improvement or acts as a financial burden. The paper will examine all the regulations and recommendations made by EU Omnibus Directive in February 2026 and India Parliamentary standing committee (Finance., 2025) recommendations of August 2025. This paper will further explore the integration of ESG with companies and its correlation with them in a long-term valuation, reduced cost of capital and enhanced stakeholders trust with this volatile economy. However, there are significant challenges like greenwashing, asymmetric compliance capacity between small and large firms, gap between formal disclosures and substantive sustainability integration. This paper will suggest some measures to bridge the gap and foster performance oriented ESG compliance.